Private Equity Ireland M&A Report – H1 2023

There were 198 deals completed in H1 2023 compared to 226 in H1 2022

Overall, Irish M&A deal volumes have experienced a decline during H1’23 vs H1’22 with 198 deals reported in our newsletter database during H1’23 vs 226 in H1’22. The year has not been forgiving for all dealmakers with rising inflation, interest rates, and soaring energy prices in the picture. A few high-level takeaways from this report include;

• International acquirers are the primary category of acquirers, with most inbound acquisitions coming from the UK
  Financial Services is the sector that we have seen the most deal activity in
•  A positive outlook remains for the remainder of the year, driven by rising business confidence and an increased appetite for acquisitions. As business sentiment continues to improve, it is anticipated that deal activity will gain momentum, contributing to economic growth and recovery.
  

Following the trend we saw in H1’22, international acquirers are the primary category of acquirers in the Irish M&A market throughout H1’23. Ireland is an attractive market for international players for reasons such as;

• Access to the European Union Market post-Brexit: Acquiring an Irish-owned business can provide immediate access to this market without the need for establishing a separate presence or navigating complex trade barriers.
• Multinational Presence: Ireland has a strong SME sector with over 270k SMEs present. In 2022, SMEs in Ireland continued their recovery, with the number of businesses growing by c. 8% YoY, and SME employment increasing by c. 7% YoY, according to the European Commission. Additionally, Ireland ranks 5th on the Digital Economy and Society Index 2022 and almost twice as many Irish SMEs are selling online as compared to the EU average, according to the European Commission.
• Skilled Workforce: Ireland is home to a workforce that supports employment in knowledge-intensive and high-technology sectors. EY reports that Ireland has the highest number of STEM graduates per capita in the 20-29 age bracket in the EU.
• Favourable Tax Environment: Ireland’s low corporate tax rate, which stands at 12.5%, has attracted many international companies to establish their European headquarters or regional offices in the country.

Supportive Business Environment: Ireland has a business-friendly environment with streamlined regulations, transparent legal frameworks, and supportive government policies from organisations such as Enterprise Ireland and IDA.

This analysis draws upon data from the Renatus weekly M&A newsletter. ‘Financial Services’ and ‘Telecoms/Tech Services’ are the two standout sectors again in H1’23.  ‘Software’ M&A deals are experiencing a decline from H1’22 levels.

• Financial Services: Financial Services is the sector that we have seen the most deals activity during H1’23.  There are a number of professional services experiencing consolidation in Ireland at the moment. Shared resources and efficiencies of scale can unlock value in a larger group. Importantly, it can also provide a means for people-led businesses to unlock the value they created within their business.  Insurance brokers consolidating is also a recurring theme as of late with PE-backed insurance brokers implementing a strategy whereby they acquire small brokers to grow the business and drive market share. Smaller companies may also trade at lower multiples than bigger ones, offering an opportunity for multiple arbitrage in the insurance broker space. Examples of a few deals in the space during H1’23 include Baker Tilly Ireland acquired by Azets, HLB Ireland merging with John McCarrick & Associates, Sayers Insurances acquired by AssuredPartners and Tim Duggan Insurances acquired by PIB group.
• Telecoms / Tech Services: Companies in this space are trying to take advantage as cloud and other new communication technologies continue to replace traditional non-digital systems in today’s evolving work environment.
• Software: The number of software M&A deals has seen a significant decline vs H1’22. After Covid, there was a surge of M&A deals in the software space but a slowdown has followed with public valuations dropping sharply throughout this period. According to a 2023 Mckinsey report, c. 84% of publicly listed software companies saw their valuations drop in the last year.

‘Other’ category includes sectors from; Aerospace, Education, Electronics, Hotels/Pubs, Other Retail, Property, Public Sector Solutions, Recruitment, Retail Food/Drink, Travel and Waste.

The Global decline in H1’23 dealmaking seems bigger based on:

• The industry has experienced a plummet in Advisory fees as a wave of job cuts is being observed with reduced deal activity. Global Advisory fees for completed deals have fallen c. 35% in H1’23 to c. $12.8bn, compared with 2022, the lowest level recorded since 2014.
• Global PE deals have also taken a toll, falling c. 51% to c. $263.3bn in H1’23, compared with last year. Factors for the recorded downturn include rising debt costs and uncertainty around the economic outlook.
• There are signs of optimism with Global deals completed during Q2’23, up c. 23% compared with the first quarter, the slowest start to the year in a decade.

Source: The Financial Times

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